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5 Retirement Savings Tips for College Students

5 Retirement Savings Tips for College Students

Chad Thomas writes tips for young people on better managing money, budgeting, and planning for the future.

If you're in college, your studies, friends, and future career probably seem a lot more important than saving for retirement. Granted, at this time in your life, managing a full classload and getting good grades should be your first priority. However, the earlier you start to save, the earlier you can retire, and the less you need to worry about it later. Fortunately, once you begin earning a little cash, saving for retirement is easy. Here are five tips to get you moving in the right direction.

Don't WaitA Roth IRA or traditional IRAare two common, easy-to-open retirement vehicles. You can designate how much you want to contribute and how you want that money invested. Because you have time on your side, you can take advantage of something called compound interest. Simply put, the more years you earn interest on your account, the more money you can save, and the less you need to contribute.

For example, if you invest $50 every month for the next five years at 8% annually, and keep that money invested for 40 years, you could pad your retirement account by almost $80,000.

Automate Your ContributionsYou can set up automatic monthly contributions to your Roth or traditional IRA via many brokerage firms. If your future employer offers a 401k plan, get signed up for that - contributions can be automatically taken out of your paycheck. Since it's automated, you won't have to worry about remembering it every month - just be sure to keep a budget so you know how much you can afford to contribute.

Keep Your Debts and Spending in CheckKeeping your debts and spending in check allows you to have more money to contribute to your retirement account. Use your student ID card to reduce entertainment costs, save on textbooks by buying them used or renting them, and scale back the partying. Every dollar you don't spend during your college years is another you can put toward your student loans. That all makes it much easier to continue saving for retirement once you graduate.

Get an Emergency Fund GoingYou might think it counterintuitive to create an emergency fund when you are supposed to be saving for retirement. However, by setting money aside for things like computer crashes or automobile breakdowns you're creating the funds you need to pay for such expenses without falling into debt. That can go a long way toward easing the process of building your retirement fund.

Saving for retirement is important, even at a young age. The future isn't certain so the more you can sock away now, the better. Think about the things you want to do with your life - travel, buy a home, have a family. Do yourself a favor and get started on saving for retirement today.

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For example, if you invest $50 every month for the next five years at 8% annually, and keep that money invested for 40 years, you could pad your retirement account by almost $80,000.

2019/06/26 15:19

You can set up automatic monthly contributions to your Roth or traditional IRA via many brokerage firms. If your future employer offers a 401k plan, get signed up for that - contributions can be automatically taken out of your paycheck. Since it's automated, you won't have to worry about remembering it every month - just be sure to keep a budget so you know how much you can afford to contribute.